How to earn 5 per cent income from your cash

DAILY TELEGRAPH – November 2019

Making your money work for you is paramount, writes Anthony Keane
You won’t get it from bank deposits, but there are still several ways to earn investment income of 5 per cent or more.

Seeking a higher yield always increases the chance of losing money, but the dangers may not be as larges as you think.

Investment specialists say diversifying across a range of – income-producing assets is the best way to reduce risk and secure a sold cash flow.

International investor Mayfair 101 Group’s managing director, James Mawhinney, said average term deposit rates were now 1.5 percent and interest rates were unlikely to go up for many years “if not decades”.

Money has been flooding into the sharemarket, where dividends paid by many major companies are often 5-6 percent.

“There are a lot of people looking to the sharemarket for dividend paying stocks but the issue is your capital is at risk in terms of volatility.”

Just look at Westpac shares, currently embroiled in a paedophile money scandal. They’re paying a dividend yield of about 7 percent but if you bought them two months ago you would have lost 15 percent of your money.

The corporate bond market was another option. “These are fixed income investments that pay a strong yield.”

Companies large and small raise money directly investor and this debt goes into investment funds, some listed on the sharemarket.

Metrics Credit Partners holds a portfolio of corporate loans in a listed income trust with a unit price that’s been steady since it launched in 2017, and a current yield of 5.5 percent.

Metrics managing partner Andrew Lockhart said investors who did not look beyond traditional assets were missing the best fixed income returns.

“By moving just slightly along the risk curve from bank term deposits and government bonds investors can earn reliable returns of 4-10 per cent a year from the corporate loan market,” he said.

Mr Lockhart said corporate loans had a low correlation to other major asset classes, including equities and government bonds, providing a source of diversification.

Other assets paying income above 5 per cent include real estate investment trusts, some infrastructure investments and income-focused exchange funds.